Sales Tax Determination

STD 95/3

Credit for sales tax paid on travellers' cheques that are taken overseas

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FOI status:

may be releasedFOI number: I 1016032

Background

Travellers' cheques are taxable printed matter and are therefore purchased by financial institutions at a tax inclusive price. They are then issued to customers going overseas. Some financial institutions have lodged credit applications on the grounds that the travellers' cheques are assessable goods exported from Australia.

This sales tax determination sets out the Australian Taxation Office view on whether financial institutions are entitled to claim a sales tax credit for travellers' cheques issued to customers going overseas.

Issue

Are financial institutions entitled to a sales tax credit for travellers' cheques issued to customers and taken overseas?

Decision

A sales tax credit is not available.

Date of effect

This determination relates to the sales tax legislation that came into effect on 1 January 1993. There were similar provisions under the previous sales tax legislation which applied before 1 January 1993.

Reasons

We have based our decision on the following legislative provisions:

Credit Ground 11 in Table 3 of Schedule 1 to the Sales Tax Assessment Act 1992.

Section 5 of the Sales Tax Assessment Act 1992 defines: application to own use, assessable goods and Australian-used goods.

The sales tax credit grounds are provided in Table 3 of Schedule 1 to the Sales Tax Assessment Act 1992. Credit Ground 11 provides a credit for goods exported while still assessable goods.

When a customer is issued with travellers' cheques he or she obtains a right, similar to a bill of exchange, to be paid a sum of money by the financial institution. The customer does not buy or own the travellers' cheques. These always remain the property of the financial institution and are returned to Australia after they have been exchanged for cash at an overseas location.

Section 5 of the Sales Tax Assessment Act 1992 defines application to own use, assessable goods and Australian-used goods.

Application to own use includes granting any right or permission to use goods.

Australian-used goods are defined to mean goods that have been applied to a person's own use in Australia.

Assessable goods are defined to exclude Australian-used goods.

For the purposes of section 5, when the financial institutions issue travellers' cheques, they grant the customer the right to use them and, in doing so, they apply the cheques to their own use. The application to own use occurs when the travellers' cheques are issued to the customer for signature.

The application to own use results in the travellers' cheques becoming Australian-used goods from that time and the travellers' cheques are no longer assessable goods when taken overseas.

As a result, the financial institutions are not entitled to claim a credit under Credit Ground 11 as the credit is only available for the export of assessable goods.

There are no other credit grounds available which could apply to the above circumstances.

Communication of the Decision

This determination is a public ruling for the purposes of section 77 of the Sales Tax Assessment Act 1992 and may be relied upon by any person to whom it applies. It will be made available for publication by the sales tax publishing houses and will be mailed directly to financial institutions.

Commissioner of Taxation
13 April 1995

References

ATO references:
NO NAT 95/2319-7

Subject References:
Credit grounds for travellers cheques

Legislative References:
Section 5 of the Sales Tax Assessment Act 1992: application to own use, assessable goods and Australian-used goods
Credit Ground 11 in Table 3 of Schedule 1 to the Sales Tax Assessment Act 1992